New kids on the ( auction ) block

WALTHAM - It's 1 p.m. on a steamy August afternoon, and a ragtag group of strangers has gathered outside a 1950s-era ranch house on Essex Street for what has become a common and bittersweet ritual across the Bay State in recent months: the foreclosure auction.

Craning their necks to assess the property, they note gutters that sport a jungle of weeds and a weather-beaten exterior that hasn't seen a fresh coat of paint in years.

Auctions can be bewildering to first-time investors like Pete Pereiria of Malden, who said he was attending the Essex Street auction in the hope of finding a deal on a first home for himself and his wife. For others, like Jason Chui, project manager for a Boston general contracting firm, the Essex Street auction is business as usual.

Chui has been at the auction game for around six years and works for a company with the resources to make the necessary upgrades. Foreclosures, despite the risks, are still the best way to pick up property at a discount, he said.

As with other aspects of the real estate industry, however, technology is closing the gap between pros and amateurs, and making the foreclosure auction more accessible to casual investors like Pereiria. Free and subscription Internet services now provide a wealth of property and public record data and make locating auctions, or just homeowners in distress, easier than ever for investors.

But mortgage industry and personal finance specialists warn that the online bonanza in foreclosure data, while useful to investors, may actually be hurting the most vulnerable parties: troubled homeowners who are under increasing pressure to dump their homes rather than try to hold on to them.

ForeclosuresMass.com, based in Framingham, is one of a handful of local and national websites that track foreclosure proceedings. Others are RealtyTrac.com, HudExchange.com, and Foreclosurelistings.com.

Notices of foreclosure are collected from trial courts across the state, said ForeclosuresMass.com co-founder Jeremy Shapiro. Company researchers then match the property named in the notice with an actual address, owner's name, tax record, and online links to maps and local assessors' offices.

Rick Sharga, vice president of marketing at Realtytrac.com, said listing services such as his, which charges $49.95 a month, are putting an easy-to-use Web interface on a paper-bound system for tracking foreclosures that, in many states, is archaic, bureaucratic, and riddled with inefficiencies.

Because they allow outsiders to learn of foreclosures long before properties go to auction, many of the new sites promote pre-foreclosure "short sale" strategies, in which investors negotiate with lenders prior to a foreclosure auction to forgive some of the debt that is owed them.

Kim Harrington, of short-sale specialist Ambrose Properties in Northampton, said that she uses ForeclosuresMass.com to generate leads and to create bulk mailings to homeowners who are in foreclosure across Massachusetts.

After doing 12 short-sale deals in 2005, Harrington said that business has more than doubled, as recent homeowners reckon with increased payments for their adjustable rate mortgages or find they have tapped all the equity in their home and are unable to sell it.

Rich Askenase, a personal bankruptcy lawyer in Charlestown, said that he also targets homeowners who are facing foreclosure with letters advertising his services.

Askenase said that his business has tripled in the last three years, and is accelerating as the housing market cools and more risky loans reset at higher interest rates, resulting in borrower defaults.

However, the easy availability of foreclosure and homeowner data online is causing headaches for distressed borrowers, says Tom Gleason, executive director of the public-private bank MassHousing.

Gloria Lopez of Leominster is one of them.

Twenty years after buying a three-bedroom ranch, Lopez was forced to refinance her home in 2005 to help pay for her daughter's education, taking out an adjustable rate mortgage with a two-year fixed rate of 6.25 percent. Weeks after closing on the new loan, Lopez lost her job, preventing her from refinancing again into a fixed-rate loan even as her interest rate escalated to 9.5 percent in March.

Lopez began falling behind on payments in December, and received notice of foreclosure in February from her lender, People's Choice Home Loan, a subprime loan specialist that has since declared bankruptcy.

By April, Lopez said, she was being deluged with mail and phone calls from all over the country. "I have people calling me all hours of the day and night telling me I should pay them to handle my mortgage," she said.

Gleason said he is worried about the pressure on distressed homeowners like Lopez from foreclosure investors, and skeptical of the new enthusiasm for pre-foreclosure investing that the new websites have helped popularize.

"I'd say that people who come in and try to buy owners out are not on our wavelength," he said. "When you get right down to it, they're trying to get people out [of their homes] faster."

Gleason and others said homeowners who have already been victimized by shady lending practices are in a poor position to sort out sophisticated financing schemes and could be victimized again once they've fallen behind on their mortgage payments.

MassHousing recommends distressed homeowners speak first with their lenders to try to work out a repayment plan, and then with a credit counseling agency if they are behind on payments rather than turning first to private investors.

Lopez said she has spoken with some of the investors who have contacted her offering to help and been shocked by offers to purchase her home for half of what she believes it is worth.

While she has brushed off such offers and focused her energies on working out a repayment plan with her lender, she said others might not be as cautious.

"People who are in this situation are desperate," she said. "They'll do anything."

Shapiro of ForeclosuresMass.com argues the flood of letters, phone calls, and solicitors that troubled borrowers now receive is no different from the coupons and solicitations from house cleaners and local businesses sent to new homeowners after public notice is made of their purchases.

And with ForeclosuresMass.com reporting almost 13,000 foreclosure notices filed in the state in the first half of 2007, some say the bigger danger would be if no one was willing to step forward and try to rescue distressed properties.

"If people are looking for a quick out, there's no way that it's going to happen," said Gleason of MassHousing. "This is going to take a long time."